Portuguese Renewables Unshaken by EU Bailout

Portugal's renewables power industry got a scare last month when the IMF advised the government to lower its support for the sector to shore up its finances after bailing out the ailing European economy.

The solar-power industry decried it "will not survive" without incentives while main renewables lobby Apren hinted any move to lower incentives would derail one of Portugal's fastest-growing industries and one of a few that survived the economic crisis unscathed.

Just a month before, the industry was fuming about a report issued by Portuguese banking major BPI that suggested the state cut its "excessive" renewables aid to help boost its coffers and lower its heavy debt.

Despite this -- and a fresh change of government -- industry observers are confident Lisbon won't be too hard on the sector. "There is no clear signal about what the new government will do yet but we are confident they will continue to support the industry," says Sven Teske, global renewable energy director for Greenpeace.

Teske said the state may renegotiate some tariffs for wind and solar projects but that these are likely to affect mostly large projects, allowing smaller projects to continue to flourish.

"There is room to lower tariffs for some projects, especially solar photovoltaic," he continued. "We think the government will cut these but not enough to jeopardize the industry, which has been a stable employer."

As part of the deal signed with the IMF and the EU, Portugal agreed to look at the possibility to renegotiate some renewable contracts to introduce a lower feed in tariff and to present about the efficiency of its renewable policies in the fourth quarter of this year.

Ambitious plan As it is now, however, the country's national renewable energy plan won't be modified, observers say.

The plan calls for Portugal (which has already surpassed the EU’s “20 percent by 2020” target) to generate 31 percent of its electricity from renewable sources by 2020, generating some 135,000 jobs. Wind should see installed generation capacity reach 8,500MW from 3,500MW in 2009 and could even top 10GW, according to Apren officials. In the solar photovoltaic market, the country hopes to have 500MW of installed capacity by 2015, up from 100MW now.

There are also ambitious growth plans in tidal wave (with some boasting, Portugal could eventually source 20 percent of its energy from the sea) while the transport sector could also achieve 10 percent biofuel blends in 10 years.

The plan, however, has its critics, including BPI, which report suggested planned photovoltaic and wind projects by 2020 should be postponed until Portugal's economy improves its health.

The report unleashed a wave of industry criticism, with Portugal's Solar Industry Association (Apisolar) branding it as "full of mistakes and incorrect information."

The association, which represents Portugal’s photovoltaic industry, said the bank's investment cut recommendations stemmed from "wrong suppositions" about the sector's operating costs and growth potential.

"Investing in photovoltaic is 25 to 30 percent below the costs mentioned in the study while the government current and future tariff cost estimates are exaggerated," an Apisolar official adds, requesting anonymity. "The report is simply absurd."

Portugal's photovoltaic sector has great growth potential with "very high quality" engineering, manufacturing and installation companies which offer the government strong employment and tax-revenue prospects.

The official added Apisolar is confident the state will negotiate sensibly and maintain existing tariffs for micro-generation and mini-generation projects key to industries’ future growth.

Meanwhile, investors don't appear overly concerned about any upcoming changes to the renewables compensations scheme. Indeed, some reports state future investment could total 90 billion euros by 2020.

IBC Solar recently announced it will increase its presence in Portugal's solar market, which it considers "strategic," saying it hopes to elevate investment 20 percent to up to 7 million euros and tap markets in Brazil and Africa from its Portuguese base.

Plans are afoot to launch the Portuguese Solar Energy Institute to help the industry strengthen its technological and research capabilities.

Humberto Rosa, Portugal's Secretary of State for the Environment, said a measured tariff downgrade could boost efforts to improve energy efficiency and therefore environmental sustainability in Portugal.

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Ivan Castano is a freelance journalist based in Miami. His work has appeared in Thomson Reuters’ International Finance Review (IFR), Dow Jones’ Financial News, Euromoney, Trade & Forfaiting Review and a range of trade publications covering...